Greylock makes $100 million venture bet on marketplaces

SAN FRANCISCO (Reuters) - In a big bet on marketplaces, venture capital firm Greylock Partners is promoting former eBay Motors founder Simon Rothman to partner, and dedicating $100 million to the sector.

Marketplaces - companies like auction service eBay, accommodation service Airbnb, and personal-loan service LendingClub - have the potential to create more billion-dollar businesses in the next five years than in the last 20, Rothman said in an interview with Reuters.

Unlike vendors, marketplaces do not hold inventory themselves but connect the sellers who have it with the buyers who want it. Innovations like the rise of smartphones, which make it easy for customers to jump online anytime to do business, are fueling marketplace businesses, Rothman said.

Silicon Valley-based Greylock has invested in several networked-marketplace companies, including Airbnb, ride-sharing service Lyft, and shopping service Wanelo.

The biggest to date is eBay, where Rothman created eBay Motors, which grew to a $14 billion business under his oversight. In a blog post, Greylock partner and LinkedIn founder Reid Hoffman said Rothman would focus on investing in marketplaces, other network-effects businesses, and transaction-based startups.

Rothman's key advice: start small.

"A lot of entrepreneurs overreach early," he said. "Having some restraint on the scope of the project drives success."

The $100 million Greylock is committing to innovative marketplaces will come from existing funds, a spokeswoman said. It will cover early-stage investing through to later-stage companies.

Rothman has been working as an entrepreneur-in-residence at Greylock, where he advised marketplace companies.